Market Update -Rates, yield curve, home prices, and CPI/PPI inflation

Good morning and happy Friday. Jordan Keck, your lender buddy, here with your weekly market update. Missed you last week, had to skip a week there, but looking forward to getting back to you with things here. So starting off, interest rates moving in our favor. Last time we did an update, they're around 6.4%. Last week they were at 6.27%, and this week coming in at 6.15%. Almost down a full half of a percent over the course of the last month, and hopefully continuing to head in that direction. Obviously, we've been talking a lot about how the Federal Reserve will be cutting their interest rates on September 18th. That's pretty much a foregone conclusion. But remember, that is not specific to mortgage rates. That's just an indication of where they're going for the overnight Fed funds rates, which does directly impact things like home equity lines of credit, credit cards, and car loans. So when they do that, we pretty much know they're going to cut it a quarter of a percent. But what their commentary is about future rate cuts, inflation, and unemployment, that will have a bigger effect on what happens to mortgage rates at that time. As far as the weekly mortgage tip, I wanted to touch on closing cost maximums when financing. So depending on your type of loan and even depending on your down payment, can impact the amount of seller credit you're allowed to ask for. So for FHA, they allow up to 6%, both FHA and USDA, up to 6% of the sales price to be given as seller credit. And of course, we know there's been an exception made for buyer agent compensation. So if that's paid for, that is allowed above and beyond that maximum contribution amount. For VA, typically it's 4%, can sometimes go a little bit above that. Conventional is the tricky one though. If it's an investor purchase, your maximum is capped at 2%. So if you have somebody that's buying a rental property they don't plan to live in, the maximum seller credit they can use is 2% of the sales price regardless of down payment. And then conventional, if it's a buyer that's going to be living in the property as owner occupied, they can get 3% with up to 10% down. If they do more than 10% but less than 25% down, they can get 6% in seller credit. And if it's owner-occupied, 25% down or more, they can ask for 9% of the sales price in seller credit. I've got a pretty handy chart that has all this laid out. If you'd like a copy, let me know. But again, just make sure that you're in communication with the lender on the transaction, or if it's a different one, feel free to call me. And make sure that you're not asking for more than can be used and run into an issue at the 11th hour when docs are being prepared. As far as news this week, first one coming up, and this is something I've talked a little bit about in the past, is the inversion of the yield curve, which means the 10-year and the 2-year Treasury, if it's inverted, you're getting a higher return on the short term, the 2-year, than you are on the 10-year, which is usually the opposite because most investors want a higher return for the longer investment term when you're risking it more. And the reason for this is typically because there's an estimation that the next few years are going to be in worse economic conditions than the later years, so they want to get a higher return in the short term. Now, we've just actually un-inverted after our longest period of inversion in history, over about 2.5 years. And so because of that, essentially means that the next couple of years are starting to look, you know, you need a higher return now to invest for longer term. It has been a fairly reliable recession indicator when the yield curve inverts, and that recession typically starts anywhere from 4 months to 10 months after the yield curve un-inverts. Whether or not that's going to happen, we'll see. Obviously, history— I've heard people say history doesn't repeat itself, but it sure does rhyme. So every time is going to be different. But that, because we've just now gone positive, it is un-inverted for the first time in 2.5 years. Be interesting to see what the next 12 months look like. Next up from that, CoreLogic's Home Price Index report showed home prices flat month over month for July, but which is quite a bit below the 0.3% growth that was expected. This is also coming after we saw a 0.3% increase in June, 1.1% increase in May, and 1.2% increase in April. So very, very strong months there. Year over year, real estate prices are still up 4.3%, but it is below the 4.7% we saw in the previous report. So decelerating those gains a little bit, but still looking good year over year. And the next up, the CPI, Consumer Price Index inflation report came in for August up at 0.2%, which was in line with estimates. So no real surprises there. Year over year inflation dropped from 2.9% to 2.5%. Because we replaced some pretty strong numbers from last August. This came in slightly below expectations of 2.6, so not a huge beat, but it was definitely good for the markets and good for the narrative of lower inflation keeping mortgage rates in the right direction. While the year over year was better, it wasn't enough to really suggest the Federal Reserve do more than the 25 basis points of rate decrease on September 18th, but it also made sure that there was no surprises in the negative direction. The core rate, which strips out food and energy prices, that rose 0.3%, a little bit above the 0.2% expected, but year over year still remained at 3.2%. And lastly here, PPI, which is the producer price index for wholesale inflation, that rose 0.2% in August, double the expectations of 0.1%, and year over year dropped to 1.7%, which came in below expectations of the 1.8%. The core rate rose 0.3. July was revised lower though, from 0 to -0.2. So year over year only rose from 2.3 to 2.4, which is still below estimates because of last month's revision. A lot of good news in here. Ultimately, that just continues the narrative of lower interest rates. It's nice. We're kind of trickling lower, so I don't think it's going to be a massive dump. But the biggest thing I'm doing right now is I'd say reach out to your past clients. Get them connected, let them know, hey, is there an interest rate that you would want? So we can set our trigger for when that happens, I can let you know. So if you have any clients that are looking for specific rate, let me know, I can set that trigger up for them. And it's a great touchpoint. So you can reach out and also make sure you're asking for referrals when you do that. Lastly, here, if you haven't already been interested or invited to my poker nights, I've been hosting that, we're suddenly just continued to grow. So we're up at 4 tables, We're almost completely booked now. I've only got a couple of spots left for the one in September on the 27th. If you're interested in that or in future nights, I've been hosting a monthly, let me know. Just a $10 buy-in, super beginner-friendly, and a fantastic time there. So if you're interested, let me know. I'd love to chat with you about that and see you at the next one. Have a great weekend. We'll see you later. Take care.